Towards Regulatory Equilibrium

Edited by Christoph U. Schmid

Tenancy law has developed in all EU member states for decades, or even centuries, but constitutes a widely blank space in comparative and European law. This book fills an important gap in the literature by considering the diverse and complex panorama of housing policies, markets and their legal regulation across Europe. Expert contributors argue that that while unification is neither politically desired nor opportune, a European recommendation of best practices including draft rules and default contracts implementing a regulatory equilibrium would be a rewarding step forward.

Towards Regulatory Equilibrium

Authors and social sectors promote tenancies as an effective alternative to homeownership, especially as a result of the 2007 mortgage crisis. However, ownership entails a range of values; among others, stability, which makes it particularly attractive. Quite often, urban leases do not offer the advantages or sufficient guarantees, for either landlords or tenants, to make them an attractive type of housing tenure. This chapter analyses legal tenancy frameworks in Spain, Portugal and Malta, including the most recent shifts towards the liberalization of the contractual relationship, in order to discuss whether urban leases in these countries constitute, in their legal configuration, a true alternative to homeownership. The German, Austrian and Swiss legal systems are also analysed briefly in order to draw parallels between the respective regimes as far as these are the European countries with the highest rates of rented dwellings.

Towards Regulatory Equilibrium

Annika Klopp and Christoph U. Schmid

Switzerland, Austria and Germany have the highest share of tenants in Europe. Economically, rental tenancies constitute an efficient debt financing of housing needs; renting is thus more beneficial than owner occupation. This finding gives rise to a basic thesis: To the extent that balanced regulation contributes to high shares of rental tenancies, it also accounts for macroeconomic benefits. For Austria, this thesis may be confirmed only partially with respect to the well-regulated and organised social rental sector funded by the state. However, private rentals are covered by complicated regimes most of which stipulate forms of statutory rent control. The Swiss case is more in point: Tenancy law is regulated in a relatively balanced way although there is a certain pro landlord-tendency. However, the resort to tenancies may also be explained by the lack of viable alternatives, due to the lack of social housing, very high prices and a prohibitive tax treatment. The German case is most in point. Regulation is relatively equilibrated, though with slight advantages for tenants; the ‘Mietspiegel’, a statistical compilation of comparative rents, constitutes a viable compromise solution between free market rents and rents fixed by statute. Yet, the current balance of private rental markets is fragile.

Towards Regulatory Equilibrium

Marietta E.A. Haffner

In many Western European countries including the Netherlands and France, the market share of private renting decreased massively after World War II. Often strict rent control is deemed to also be responsible for this development. Yet more recent development indicates a further decline of the sector in the Netherlands, whereas its market share stabilized in France. This chapter explains the development of the private rental sector resulting from private individual or person landlords leaving the sector in the Netherlands, but staying in operation as landlords in France. While in France the institutional landlords/investors retreated, in the Netherlands they kept up their rental stock until the subsidization of new investment became less attractive and in the end was abolished. How ‘rent tenure’-neutral subsidization seems to have played a role, is the central focus of this chapter.

Towards Regulatory Equilibrium

Per Norberg and Jakob Juul-Sandberg

The Nordic countries Sweden, Finland and Denmark possess exemplary social tenancy regimes focusing on rent control and other elaborate interest balancing mechanisms: Denmark has as its principal form the cost-based rent, which is fixed at below market level on the basis of the running costs, a surcharge for improvements and a small profit margin. Finland liberalized rents in the 1990s in order to bring more apartments onto the market, though the link to a cost index is usual for rent increases. Sweden has a system under which most rents are negotiated collectively between tenant unions and municipal and private landlords. The Swedish and Danish rent regulation is complemented by a protective regulation of duration and termination of contracts, which normally enable the tenant to opt for prorogations; also, the tenant has the right to transfer the tenancy to family members. As a result, it is often impossible for the landlord to terminate the tenancy contract even for reasons of personal or family use. Against this background, the authors propose to assimilate the doctrinal concept of tenancies to that of ownership, so as to fully implement the principle of tenure neutrality.

Towards Regulatory Equilibrium

Špelca Mežnar and Maša Drofenik

During the socialist era, the development of the principal types of housing tenures in Slovenia, Croatia and Serbia was similar to the other former Yugoslav republics. Collective rights enjoyed priority, while individual rights were neglected. The notion of ‘social ownership’ was developed. After the dissolution of Yugoslavia in the early 1990s, the process of shifting the responsibility for housing issues from state to local authorities or to individuals was similar in all three countries. The most important part of the housing reform was privatization and restitution. As a result, Slovenians, Croats and Serbs have become nations of extremely high proportion of homeownership. Rental tenancies are disliked and seen as a measure of last resort by the citizens. The authors of this chapter attribute this state of affairs to the ineffectiveness of the legal system, obsolete legislation, incomplete, disproportionate and unbalanced tenancy regulations, a lack of inhabitability standards and inefficient inspection authorities. Therefore, legislative reforms should be adopted in all three countries in order to render rental tenancies more attractive.

Towards Regulatory Equilibrium

Christoph U. Schmid

Switzerland, Austria and Germany have the highest share of tenants in Europe. Economically, rental tenancies constitute an efficient debt financing of housing needs; renting is thus more beneficial than owner occupation. This finding gives rise to a basic thesis: To the extent that balanced regulation contributes to high shares of rental tenancies, it also accounts for macroeconomic benefits. For Austria, this thesis may be confirmed only partially with respect to the well-regulated and organised social rental sector funded by the state. However, private rentals are covered by complicated regimes most of which stipulate forms of statutory rent control. The Swiss case is more in point: Tenancy law is regulated in a relatively balanced way although there is a certain pro landlord-tendency. However, the resort to tenancies may also be explained by the lack of viable alternatives, due to the lack of social housing, very high prices and a prohibitive tax treatment. The German case is most in point. Regulation is relatively equilibrated, though with slight advantages for tenants; the ‘Mietspiegel’, a statistical compilation of comparative rents, constitutes a viable compromise solution between free market rents and rents fixed by statute. Yet, the current balance of private rental markets is fragile.

Towards Regulatory Equilibrium

Irene Kull and Ave Hussar

The Baltic States, Lithuania, Latvia and Estonia, belonged to the Soviet Union until 1991 and are still struggling with the legacies of Communism. Privatization and restitution measures have produced the highest rate of homeownership in the EU here, ranging between 80 and 90 per cent. The privatized housing stock is often in very bad condition, being composed of many small flats without basic amenities. This contributes to the constant need for new dwellings. However, the more recent reforms have realized, at least as regards the ‘law in the books’, a certain degree of interest balancing and stability of rental tenancies. Yet tenants seem more protected in Lithuania and Latvia than in Estonia. Constitutive regulatory features such as the requirements on form and registration, duration and termination of rental agreements, emptio non tollit locatum as well as social defences in the eviction procedure have been dealt with in the new legislation. That notwithstanding, the low number of tenancy relationships and court cases will certainly delay the development of a more effective tenancy law system.